Norway eyes eco investment role for wealth fund

By Wojciech Moskwa and Ikuko Kao

STAVANGER, Norway (Reuters) - Oil-rich Norway is pushing ahead with plans to use part of its $400 billion sovereign wealth fund to invest in renewable energy development, a deputy finance minister said on Monday.

The idea to divide the wealth fund, officially named the Government Pension Fund -- Global, and siphon off part of it to invest in environmental projects has been criticized by Norway's central bank, which runs the fund for the government.

This spring Norway began an evaluation of the fund's ethical guidelines, including the possibility of earmarking some of the cash for special purposes such as investing in environmental technology firms.

As an oil and gas producer, Norway says it has a moral obligation to do what it can to reduce carbon emissions blamed for global warming. Some environmentalists want it to put oil money into carbon capture and storage in particular.

"We believe we see a trend developing among large, institutional investors in the direction of setting up smaller funds earmarked for special purposes," Deputy Finance Minister Henriette Westhrin told a seminar on green energy.

"Environmental issues are one possible option for a special mandate," said Westhrin from the Socialist Left (SV) party.

Norges Bank has said diverting the fund's cash for environmentally-friendly investment would clash with its effort to base investment on financial criteria, and the government should tap its own budget if it wants to fund such ventures.

Europe's biggest equity investor, the fund has swelled due to sky-rocketing oil prices. It invests in foreign stocks and bonds to avoid overheating Norway's economy and driving up its currency.